Builders Are Exempt from Consumer Protection Claims

Builders Are Exempt from Consumer Protection Claims

Posted By
Whims Legal Group

For years, the Michigan Consumer Protection Act (MCL 445.901) has been
used as a means for consumers to make claims against various types of
business for perceived wrong-doing. This statute has been construed by
the courts to hold that builders were subject to Consumer Protection Act
claims. Most Consumer Protection Act claims against builders revolved
around some type of alleged misrepresentation or failure to follow contract
or other project directions. While the facts of the cases are generally
no different than a typical breach of contract claim, the Consumer Protection
Act had one critical difference from a breach of contract claim. Specifically,
the homeowners could recover the attorney fees they would have expended
in pursuing the claim if they prevailed on the claim. That number could
easily equal or exceed even a medium-sized claim.

On June 6, 2007 the Supreme Court of the State of Michigan ruled, “Under
MCL 445.904(1)(A), residential home builders are exempt from the MCPA[.]”
That means no more Consumer Protection Act claims can be brought against
residential home builders.

It is worth noting that the rationale used by the Court went something
like this:

The Michigan Consumer Protection Act only applies to individuals who engage
in transactions that are not “specifically” authorized by
law, regardless of whether the specific misconduct alleged is prohibited.

What that means to the residential builder is that if you do run afoul
of some legal or contractual obligation while building, a Consumer Protection
Act claim cannot be maintained against you. However, if a residential
builder decided to open some non-building related business, the licensure
in the one activity (building) would do nothing to prevent a Consumer
Protection claim on this other unrelated activity.

The other item the Court placed great emphasis on is that, in response
to a Consumer Protection Act claim, the builder and/or his attorney must
immediately allege that the complained-of conduct is specifically exempt
because of the builder’s licensed status. This is what the law calls
an “affirmative defense.” An affirmative defense must be alleged
with the initial pleading that you or your attorney file on your behalf,
or it is forever waived.

To understand the importance of this holding it would be appropriate to
compare the Consumer Protection Act for homeowners to the Construction
Lien Act for builders. By being able to recover attorney’s fees,
consumers (read: “homeowners”) could sue builders for alleged
wrongdoing and have the additional incentive or consequence of also being
able to recover attorney’s fees. Now think of the times you have
either engaged in or heard of a construction lien act case. Besides the
cloud on the title that the construction lien provides, the ability for
the Construction Lien Act to provide payment for the contractor’s
attorney’s fees is a huge incentive for many homeowners to pay their
bill. Indeed, I am litigating a number of cases on behalf of builders
where we are trying to not only get all of the project money owed to the
builder, but also the attorney’s fees the builder paid throughout the case.

The effect of eliminating Consumer Protection Act claims against builders
is that homeowners cannot harass a builder into some form of settlement
merely out of the builder’s fear that there is some chance the builder
will end up losing the claim
and paying the homeowner’s attorney’s fees.

If any of you have any questions about this or how it might apply to your
business, please do not hesitate to contact me.

Besides being a past President of the Home Builders Association of the
Grand Traverse Area and a licensed contractor, Robert Whims is an attorney
at Whims Legal Group, PLC, located at 12935 S. West Bay Shore Drive, Traverse
City, MI 49684. Telephone: 231-938-6099; Facsimile: 231-421-6686; E-mail:
rwhims@whimslaw.com